Nearshore Outsourcing Mexico: Next Door Collaboration
There’s no shortage of crises to fill the plates of every man, woman, and child that walk the streets of this nation. Even as you’re reading this article a few come to mind, but that’s no breaking news. Such is humanity’s plight stretching back hundreds and hundreds of years, from the housing market crash of 2008 to the Great Depression to virtually every war fought on home soil. It’s our lot in life to live in interesting times.
Chances are one of the crises in the modern era that came to mind doesn’t include the current software developer shortage crisis in the U.S.A. You might not have even been aware of such a problem till now. With how crucial technology has been integrated into the framework of every country on the planet, the U.S. only one among many, the very concept of software engineering labor pools drying up seems bizarre.
And yet here we are.
According to the U.S. Bureau of Labor Statistics, there will be 1.4 million computer science-related jobs available to the public in our current year. However, there will only be around 400,000 computer science graduates to fill those roles. The open jobs can’t be met with the current low amount of computer science grads being churned out of our institutions.
The issue runs deeper than higher education. Only 45% of high schools across the U.S.A. teach computer science, fewer than 3% of college students graduate with a degree in computer science, and only 8% of STEM graduates are in computer science. Heck, in 22 states, computer science classes don’t count towards graduation credits.
We could attempt to go into depth about the root cause of this depletion of workers, but we’re not here to talk about what has happened. We’re here to talk about what can be done. With a shortage of competent manpower to supplement the software engineer field, new developers will have free range of choice for where they want to work, driving up the cost of your average engineer while decreasing the overall quality of their work. Software engineers deserve respect and consideration for their skills, but flooding the market with overpriced, underwhelming employees does more harm than good for everyone involved.
Searching within our country’s margins for a qualifying software engineer candidate isn’t viable anymore. Thankfully, what the U.S. lacks can be made up for in multitudes by our next door neighbor over the border: Mexico. The time for nearshore outsourcing has come.
What Is Nearshore Outsourcing of Software Development?
What’s commonly understood as a single business concept - that being outsourcing - can be broken down into three distinct categories: onshore, offshore, and nearshore. For onshore outsourcing, a company will outsource their work to a local company, keeping the work stateside. Offshore, which tends to be the go-to poster for outsourcing, sends work overseas to a foreign country such as India, China, or Scandinavia.
Those two options aren’t as important as nearshore outsourcing. Nearshore outsourcing takes a little bit of column A and column B for an optimal compromise between offshore and onshore outsourcing. In direct terms, nearshore outsourcing is the practice of selecting a software development services company located in a nearby country, in preference to a more distant option. This will delegate control of software development projects to a qualified provider that has the right talent, capabilities, time, and resources to handle the required business needs and deliver digital innovation.
In this instance, our nearshore outsourcing location of choice is Mexico, wherein we’ve already established a mutually beneficial relationship between services rendered and collaboration. As for what makes Mexico the best choice for outsourcing, there are several reasons to pursue such a partnership that we’ll be more than happy to delve into.
Top 8 Benefits of Outsourcing Software Development to Mexico
1. U.S. #1 Trading Partner
According to the US Census, Mexico has surpassed China and Canada and is now the United States’ #1 trade partner. From January through November 2019, exports to Mexico totaled $237.31 billion and imports totaled $330.51 billion, returning a total trade value at $567.81 billion. These top three countries account for about 45% of all U.S. trade with the world, with the remaining 55% spread among over 200 nations.
The close economic ties represented by this data between the United States and Mexico help define a culture of reliable collaboration between our two nations. Electing to outsource to our top trading partner helps guarantee future cooperation in similar endeavors while securing mutual profit and quality work.
2. Proximity and Real Time Communication
Time zones are the Achilles heel of offshore outsourcing. Compare the U.S. to India. Central Standard Time to India Standard Time is nearly 12 hours apart, meaning by the time our work day has begun, theirs is already over. Time is money, and without being able to effectively communicate with your outsourcing partners, every part of the development process slows to a crawl.
For instance, let’s say your partner in India runs into a coding issue that they need to bring up to you. They send off a message that won’t be properly addressed until the U.S. workday begins. Once we receive it on our end, we then have to work out a solution, which then has to be sent back. When their work day starts, they’ll be able to implement the solution, a solution that cost 3 days of work to come to.
Being able to discuss matters with your partners in real time is vital for the outsourcing process to function properly, meaning you need a partner in your time zone. Mexico shares the U.S. border, and that includes all pertinent time zones for real-time teaming. The U.S. culture is one of the most fast-paced in the world, and Mexico’s close proximity allows for more compatible working hours, facilitating communication and enabling rapid development processes.
In addition, travel is more convenient, affordable, and comfortable, with 2-4 hour flights on average and many direct ones from major U.S. cities, including the Bay Area. Were you to attempt a face-to-face meeting with an outsourcing company in China, you’d have to burn time, money, and resources to send your representatives overseas. Not only are you factoring in the flight, your expenditures include hotels, food, transportation, and so on simply to ensure a personal meeting. It’s less than ideal.
In contrast to offshore outsourcing, where difficulty in communication prevails, with unproductive business hours trying to communicate with a team on the other side of the world, nearshore outsourcing to Mexico has all the benefits with none of the drawbacks. Plus, even in consideration of other “nearshore” countries in Latin America, Mexico still retains the upper hand when it comes to cost and convenience. Even a few countries over can be inconvenient if you’re trying to have face-to-face time with project teams.
India may have stood in the limelight for software outsourcing needs for years, but nearshore Mexico companies have begun uprooting them from their throne.
3. Large Talent Pool
The main drive for looking to outsourcing as an alternative has been America’s evaporating talent pool for new potential employees. We aren’t generating enough competent software engineers to meet the demand. With supplies running low, U.S. companies need to turn to reliable sources with rich enough talent pools to stem the tide.
Mexico happens to have exactly what we need in droves. Mexico is currently producing a higher proportion of STEM graduates than the United States with 85,000+ STEM graduates per year, meaning there is much less competition between recruiters south of the border. According to the U.S. Department of Education, only 16% of American high school seniors are proficient in math and interested in a STEM career.
4. USMCA’s IP Protection
There’s been a lot of buzz over the USMCA, abbreviated from the United States-Mexico-Canada Agreement, and about how it will impact and improve the trade relations between our three countries. In Mexico’s case, regarding nearshore outsourcing, the new and improved USMCA gives them an advantage with extra IP protection.
Intellectual Property Rights are time-limited rights that the government grants to inventors to exclude others from using their creations without permission. IP protection is one of the U.S. key comparative advantages, and has been a trade negotiating objective since 1988. The IPR chapter in USMCA establishes an updated legal framework of minimum standards in North America and aims to support tech innovation promoting a healthy balance of rights and obligations.
This is one of the most standout examples of what makes Mexico superior to other nearshore countries. The USMCA explicitly grants these bonuses to three countries: the United States, Canada, and Mexico. Every other nearshore country in Latin America won’t be provided with these unique protections, incentivizing local companies to engage in outsourcing partnerships with Mexico.
To learn more about the benefits of USMCA’s IP protection, follow this link for a more detailed article.
5. Cost Competitiveness
Let’s be straight here: if you take your pick of IT talent in Mexico, you’ll find someone that costs a third as much as you’d find looking locally. There’s a considerable gap between costs of local software engineers in the United States and Mexico. On average, a Senior Developer can charge $156 an hour. The comparable level of talent in Mexico can run you $52 USD, and you won’t have to worry about sacrificing quality either.
What’s important to note here is that outsourcing is not simply a price game. If you hit “lowest price first” on the filter, you’ll probably be able to find lower cost options in offshore locations. Going for the cheapest option may seem appealing, but in return you’re taking the bullet that can cost you later. These cheaper offshore options can’t compare in terms of successful collaboration to teams located just south of the border, and simply going for the cheapest can become a high expense in the end. Feel free to use our Nearshore Teams Cost Calculator to gauge how much a nearshore team in Mexico will run you.
6. High Cultural Affinity
Diversity is a great thing to have, but there’s a major caveat to be had when comparing diversity with cultural affinity. While working with China or Japan may check off the diversity quota, there’s a much higher risk that the differences between Western and Eastern cultures will throw a wrench in the work process. The greater the difference between cultures, the harder collaboration is going to be.
Granted, Mexico is not an English-first speaking country, but the issue here isn’t necessarily language (though shared language does come into play). Both the U.S. and Mexico share cultural similarities dating centuries thanks to the shared border between us. Our close proximity permits minimalized communication gaps and provides a unique differentiator in that the teams understand one another’s perspectives, way of business, and working. The same cannot be said for offshore companies.
7. High Quality Education
Mexico houses hundreds of Universities and educational centers that offer state of the art engineering and IT courses. Around 20% of the country’s public funds are directed to the education sector for tasks such as building or expanding schools, teacher certification, and investments in modern STEM teaching and learning methods. While the U.S. may not necessarily be providing the proper educational framework to promote STEM studies, particularly with computer science, Mexico is making a name for itself and providing high quality education for students to excel.
8. Growing IT Ecosystem
Mexico has a 10% software job growth rate YoY, with over 500,00 IT professionals. Our very own delivery centers are located within the Bajío Regional Alliance, comprised by the five most competitive states in the country. The Bajío Alliance has quickly become the most attractive region for foreign direct investment, with over 91 billion dollars during the last 20 years, representing 17% of the country’s total FDI.
Mexico’s second largest city, Guadalajara in the state of Jalisco, is considered to be the country’s Silicon Valley. As such, it’s become a hub for big tech companies thanks to its growing immigration rates from all over the world to take part in its rapid tech development. Guadalajara specifically, as the location of one of our delivery centers, is now home to hundreds of high tech organizations, including IBM, HP, Cisco, Jabil, Toshiba, Oracle, and more.
As Mexico’s IT ecosystem continues to grow and evolve, we believe it will become one of the foremost countries for leading technological innovation. Guadalajara’s current growth is what we believe to be the predecessor of greater things to come as it continues to accrue highly skilled software engineers available to lend their skills to outsourcing opportunities.
There are many reasons why nearshore outsourcing outpaces any of its peers, and even more reason why Mexico ranks above other nearshore options of the like. Even though comparatively labor costs remain practically the same between nearshore countries, Mexico benefits from bordering the United States, providing it with benefits from the USMCA, greater cultural affinity, and convenient communication and travel times.
Sure, there are still plenty of reasons to outsource to overseas companies, or to stay within the country and hire American. The thing is, when it comes to high quality, cost effective software development, you’re not going to find a better deal than outsourcing to a Mexican nearshore company. If you’re interested in learning more about our NearshorePLUS services and how we can help you, visit our contact page.